13 mortgage questions to ask — and the answers you want

Owning a home is a pipe dream for many. And here is why it is on the decline.
USA TODAY

A "for sale" sign is seen in Miami. Home ownership is no longer the issue on the campaign trail it once was.(Photo11: Joe Raedle, Getty Images)

Having a list of mortgage questions to ask potential lenders is just the start. Knowing the answers you’re looking for puts you ahead of the game.

1. Which type of mortgage is best for me?

This question will help you know if you’re talking to just a producer — a salesperson — or a quality advisor. When you ask, “What are my options?” for each type of loan discussed, the mortgage lender should tell you the pros and the cons in light of your particular situation. Use this mortgage guide to get up to speed.

2. How much down payment will I need?

A 20% down payment is every lender’s ideal, but you have choices here, too. Qualified buyers can find mortgages with as little as 3.5% down, or even no down payment. Again, there are considerations for every down payment option. The best lenders will take the time to walk you through the choices.

3. Do I — or the property I’m buying — qualify for any down payment assistance programs?

If you really want to size up your mortgage lender’s value, this is the question that will do it. If you get a chuckle or a groan in response, move on. Lenders with knowledge of local, state and national down payment assistance programs — and the wherewithal to help you navigate the process — are well worth the hunt.

4. What is my interest rate?

Sure, you’re going to ask this one. It’s the one benchmark we all understand. Or do we? Lenders can move the needle on your interest rate a number of ways, most of them involving additional fees.

But after talking to at least a couple of lenders, you’ll get an idea of a ballpark interest rate you’ll qualify for. Let’s say it’s 5%. We’ll call that your payment interest rate because that’s what your monthly mortgage payment will be based on. Knowing that, you’ll move on to the next — and very important — question, about the annual percentage rate, or APR.

5. What is the annual percentage rate?

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When you have zero-discount-point APRs from competing lenders, you can see who has the lowest fees for the same payment rate. In our example of receiving a 5% payment rate, you’re looking for the lowest APR based on that payment rate. Maybe one lender offers you a 5.25% APR, and another a 5.5% APR. The 5.25% APR lender is charging you fewer fees.

A higher APR is not always a bad thing. Say you’re buying your “forever home.” If you buy some discount points to lower your payment rate, you’ll have a higher APR. But after some years, you’ll make up for the additional fees by paying less in interest thanks to that lower payment rate.

6. Are you doing a hard credit check on me today?

It’s always good to know when the lender is going to perform a “hard” credit check, called a “hard pull.” That type of payment history inquiry shows up on your credit report. Lenders need to do this to give you a firm interest rate quote.

When you’re shopping more than one lender, you’ll want these hard credit pulls to occur within a short period of time — say within just a week or so — to minimize the impact on your credit score.

7. Do you charge for an interest rate lock?

Once you’ve decided on a lender, you may want to lock in your interest rate at some point. This ensures that it doesn’t go up — though it won’t go down, either. The answer you’re looking for on a typical home loan (not a construction loan) is: There’s no charge for an interest rate lock.

8. Will I have to pay mortgage insurance?

If you put down less than 20%, the answer will probably be “Yes.” Even if the mortgage insurance is “lender paid,” it’s likely passed on as a cost built into your mortgage payment, which increases your rate and monthly payment. You’ll want to know just how much mortgage insurance will cost and if it’s an upfront or ongoing charge, or both.

Then ask the lender what your options are. The answer may be just, “Make a bigger down payment.” Or, you may find there are other loan programs that you might qualify for that don’t require mortgage insurance.

9. What will my monthly payment be?

You’ve probably asked this question already. But knowing what your monthly mortgage payment will be is kind of key to the whole deal, right? You’ll also want to ask if there is any prepayment penalty if you pay off the mortgage early — for instance, if you move or refinance. The answer should be “No.”

10. Do you have an origination fee?

An origination fee provides additional profit for the lender beyond what’s built into the interest rate. A good follow-up question: What are all of your lender fees? Be sure to specify “lender fees.” They’ll know what you mean, because there are also additional costs … which you’ll ask about next.

11. What other costs will I pay at closing?

Fees that are charged by third parties, such as for an appraisal, a title search, property taxes and other closing costs, will be paid at the loan signing. These costs will be detailed in your official Loan Estimate document and your almost-time-to-sign Closing Disclosure. But the sooner you know what they are, the better you can shop, compare — and prepare — for them.

12. How — and how often — will I be updated on the loan’s progress?

Will you have a single point of contact throughout the mortgage loan process? And how will you be updated on the progress: by email, phone or an online portal? Establishing your service expectations upfront, and seeing just how eager the lender is to meet them, will give a clear point of comparison among lenders.

13. How long until my loan closes?

Of course, you want to know what your target closing and move-in dates are so you can make preparations. And just as important: Ask what you should avoid doing in the meantime — like buying new furniture on credit and other loan-busting behavior.